Skype @ MindSay

WiMax will eventually engage with 3G in the field of voice communication.

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[+] The declining communication revenue

 

Imagine this: you will be able to make mobile phone calls for unlimited minutes so long as you pay a fixed amount of money each month; if you want to watch a movie or download music or use other value-added services, you pay additional charges, but there's no such costs as communication fee or transmission fee any more.

 

For telecom operators, this is a nightmare. No more are the good days of waiting for subscribers to make phone calls and printing phone bills calculated on talking minutes. They now have to earn their meals by providing sufficient contents. But that is too troublesome and not the specialty for operators. Worst of all, they will have to share money with content providers.

 

This is what's happening to your phone line at home. For an ADSL line, the telecom operator is able to charge only two types of fee: the lease for the line (including voice and data services) and the Internet access fee. Both are almost fixed each month.

 

If, instead of dialing traditional phone calls, you use the line only to dial Skype VoIP calls, you will be able to use both the Internet and the voice services with that amount of monthly payment. Eventually, telecom operators will have to sell IPTV to you to look forward to earning more through contents.

 

Yes, wireless bandwidth resources are limited and incomparable with the cable broadband. But who can say that some kind of a novel technology will not appear in the future to change all this? After all, consumer demands are always there and the amount of bandwidth that a consumer can buy with each dollar has been on the rise over the past years.

 

[+] The unpredictable future of WiMax

 

In the field of 4G, a concept which is not even clearly defined so far, players are already fighting for the ability to set the standards. Thanks to the promotion of Intel, WiMax has got the support of many telecom equipment suppliers and handset manufacturers, and is now the hottest bidder for the 4G technology.

 

Intel is going to embed WiMax into its notebook computers, in a hope to get the popularity that WiFi once had. Despite the slower-than-expectation progress, the ambition of the giant should never be ignored. In addition, Nokia has also got into the line of supporters, announcing its plan of introducing WiMax handsets.

 

However, in view of the current status of 3G services around the world, WiMax, which claims to be 10 times faster than 3G, is really in an awkward position. As 3G has been in commercial use for only a few years, mobile operators who are yet to retrieve the return of their investments are really hesitating about making additional investments in WiMax.

 

A more possible solution is to issue licenses to fixed-line telecom operators or emerging mobile operators and allow them to build WiMax APs. As a matter of fact, struggling to stem the multi-year decline in revenue, fixed-line operators have been longing for accessing the mobile market for many years. For them, WiMax could be an opportunity.

 

When mobile operators have little interest in WiMax, a fallacy has appeared in the market, holding that WiMax is a complementary service, instead of substitute of 3G. This has rendered wider imagination for WiMax, particularly in the China market, where 3G has not been launched yet.

 

[+] 3G and WiMax: foes, not friends

 

The two services are considered by some to be complementary because the priority of 3G is the mobile voice communication, while WiMax, with its advantages in data transmission, can provide notebooks with the Internet access. In this regard, mobile operators could build two types of network to separate the services: "3G serves people on feet, and WiMax serves people on seats."

 

In Korea, dual-mode handsets supporting both 3G and WiMax are already available in the market. It seems possible for both to co-exist peacefully? However, we see now that the two technologies are born to fight each other to death and there could never be such a thing as complementation for each other in the real market.

 

First of all, if fixed-line operators get the WiMax license, they will use the data transmission capability of WiMax to provide wireless VoIP services, which is bound to dig a portion of subscribers away from mobile operators. With so many world-leading suppliers involved in the development of WiMax handsets, the supply of terminal devices will not be a problem sooner or later.

 

It is reported that the data transmission cost of WiMax is only one tenth of that of 3G. Maybe the WiMax community led by Intel is too optimistic. But if it were true, the fee rate of WiMax-based VioP could be as low as one tenth of that of 3G too.

 

If the operators that have got the license forget the fact that the number of mobile phone subscribers is far larger than that of notebook users, and only plan to provide Internet services to notebook or PDA users with WiMax, then they must be crazy. WiMax will definitely engage with 3G in the field of the voice communication.

 

[+] Mobile phone flat rate with unlimited minutes

 

Were WiMax to appear a little bit later, the follow-on versions of 3G might have the chance to provide larger bandwidth and a more comprehensive IP environment; or, in plain words, a 4G network environment upgraded from 3G might be able to provide the VoIP service, thus render WiMax unnecessary?

 

Could VoIP all-you-can-eat monthly flat rate become a reality in the 4G time? It will have to depend on how low the transmission cost is. Even if it is low enough, the 4G-based VoIP service might still be charged by minutes in the initial stage. Operators will not withdraw to the bottom line of monthly flat rate at once, so long as the fee rate is acceptable to consumers.

 

Yet for 4G Internet accessing for notebooks, which does not go through a phone number, operators might consider to offer monthly flat rate. Although 4G is a comprehensive IP environment, operators might still want to separate the Internet access from the voice communication after taking into consideration the reality in the marketplace.

 

However, there's one thing uncertain here. Today, WiFi handsets with embedded Yahoo! Messenger or Skype are already available. Such handsets will be supported in the 4G wireless network too. With such handset and access to the 4G network of an operator, consumers would be able to make phone calls free by only paying the monthly fee.

 

Such handset might not have their own phone numbers, or would have to go through troublesome procedures (e.g. SkypeIn) for the numbers, or might encounter the containment from telecom operators. But anyhow, the competition is there and operators have no way to pass it by. It will eventually drive 4G VoIP toward the destiny of monthly flat rate.

 

The trick is that if 4G really offers monthly flat rate, it will deprive Skype of its room of survival on the mobile terminal. How could Skype, a service that depends on consumers' hunger for lower fee rates, expect to survive any longer once the mobile phone service is as cheap as what monthly flat rate offer?

 

To be able to make free phone calls has been the dream of mankind, and unintentionally become the driver for the evolvement of the communication technology. Telecom operators who depend solely on the switching of phone calls or transmission of data for their income would face severe challenges sooner or later. They will have to transform into service providers with diversified abilities. ( 2006/12/03 - By Digitalwall.com - Way to China Internet/Telecom )

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Prev : Great Future of Wireless Broadband (3) Scarce Resources
Next : The Fourth Generation of Internet Marketing (1) RSS Marketing

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- Today in History

Mobile TV Market (3) Terminal Manufacturers & Content Providers - 2007/12/02

Great Future of Wireless Broadband (4) WiMax, 3G and 4G - 2006/12/03

Internet and Books (1) Dilemma of Online Publishing - 2005/12/04

VoIP (2) Who Depends on Whom - 2004/12/05

VoIP Gives out the First Cry - 2003/12/07

Many round-about business models have appeared as a result of the technical bottleneck. Unfortunately, none is the ultimate solution.

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[+] "Killer application" does not exist at all.

 

What is the "killer application" that attracts consumers to apply for ADSL? Or, in other words, if you want to apply for ADSL, what is the application behind your decision?

 

Is the reason for a larger mailbox, or the Internet TV, or the ability to download larger files, or the video phone? You can hardly tell what it is exactly. Anyone who applies for ADSL is aiming at "all of the services available on the Internet", instead of any particular one.

 

In other words, the killer application is the entire Internet itself, which is a fact ignored by most people even though the Internet has been developed for more than a decade now. Whenever a new transmission technology runs into a bottleneck in the market, the first reaction of those involved is to find a killer application, although they have never succeeded to find one at all.

 

This is the paradox of Taipei, the largest WiFi city in the world, which has merely 40,000 WiFi subscribers. Both the city government and its contractors believe that Voice Over WiFi could substantially stimulate the growth of the subscriber number.

 

I don't know if you ever have the experience of making phone calls through WiFi. I myself once dialed a call with the Skype phone of a leading supplier over WiFi (without connecting to a computer). Frankly, the communication quality depends on your luck. After all, WiFi is not designed for voice communication.

 

[+] Price cut is not the solution.

 

If we look back at the process that we upgrade all the way from the dial-up access to the 512K ADSL, and then to 1M, 2M, 8M and 12M, we can see that there is only one fundamental driver behind: the price. Following each price cut, a large number of users switch to services of higher bandwidth.

 

Currently, the monthly fee for the public WiFi service in Taipei is about NTD400. Will the number of subscribers rise drastically if the fee rate is cut down to NTD200? Frankly speaking, with my own experience of using the service, I dare not say yes. Yet for service providers, such a fee rate is too little.

 

From the viewpoint of consumers, a flawed product (at least with many restrictions to its functions) has little appeal however cheap it is. From the standpoint of service providers, those who could bear the flaws and functional restrictions are the ones with real demands, and therefore, a price cut is the least thing they should do.

 

The question is how large is this group? When we get the answer, we will see that the target group of the public WiFi is really a small one. They must be notebook owners who are often out of their office and have Internet access demands. What's more, their range of activities must be around streets, where good signals are available.

 

Typically, such people are either computer addicts or salespersons. In this sense, it is safe to say that we are lucky to have so many public WiFi subscribers. Then how come we have built so many WiFi APs - enough to cover 90% of our population - for such small group of people?!

 

[+] Households are the only hope for the increase of the subscriber number.

 

With the earnings pressure, public WiFi service providers are beginning to shift their eyesight to corporate users. This is a right business decision, as they will be able to secure a large user base rapidly by introducing service packages or price cuts in the corporate market, not mention corporate users are the very target of the public WiFi.

 

Nevertheless, it is by no means a smart investment to spend so much money in building so many APs to only serve business people who own notebooks in Taipei. If the subscriber number is what counts, the target market of the public WiFi service should be households. In other words, it should try to substitute ADSL.

 

Notebooks have become the mainstream in the computer market over the past years. With their mobility, notebooks can be used in your study, sitting room, bedroom, or on the road. Once regarded as a subsidiary product to the desktop computer, the notebook is now in the mainstream and the primary choice for many people.

 

The problem is, when you use your notebook at home, the ADSL cable does not follow you everywhere. Yes, you can use a WLAN at home, but not everyone is good at constructing a WLAN AP. Maybe WWAN like 3G could provide a solution to such problems.

 

Theoretically, 90% of the citizens in Taipei will be able to surf the Internet with their notebooks at their sitting rooms, kitchens and bedrooms without the restriction of the ADSL cable, so long as they pay NTD 400 each month to subscribe for the public WiFi service. The reality, however, is not that simple.

 

[+] Technical restriction is the root.

 

"To compete with ADSL in the same market" is a viable direction. However, with the bottleneck of the WiFi technology in the WAN field, the commercial public WiFi service has been unable to grow big. With such a large coverage, the APs have not been able to enter the largest household market, and suppliers engaged in the niche market are still struggling to sustain themselves.

 

How about offering the AP in households free of charge to the public, instead of having all APs run by a single operator? This is the idea of FON, which was founded in Spain in November 2005. By purchasing a USD5 FON router, consumers could share the broadband at their homes with anyone else.

 

Of course, you can use the FON wireless broadband of others when you are out of your home. The WiFi service provider, which entered the Taiwan market in November, has secured 80,000 subscribers all over the world within only a half year after the introduction of the service. What's more, its subscriber base is growing by 10,000 each month.

 

However, the deployment of APs is a highly sophisticated technological work, and requires optimization for satisfactory quality. It is beyond the ability of this grass-root model. Can this service cover 90% of the population? Or even if it can, would the problem that it will face be any different from the existing public WiFi network in Taipei?

 

Few people would be willing to install an AP at their homes, fewer to share them with others. Considering the world population, the subscriber number of FON is nowhere near large at all.

 

The root is the technical bottleneck, which has led to the appearance of a lot of round-about business models, in wireless broadband market, like public WiFi in Taipei or FON. Unfortunately, none is the ultimate solution, for what consumers need is the ubiquitous access, which only WWAN, for example, 3G or WiMax can provide. ( 2006/11/19 - By Digitalwall.com - Way to China Internet/Telecom )

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Prev : Great Future of Wireless Broadband (1) Living in the WiFi City
Next : Great Future of Wireless Broadband (3) Scarce Resources

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- Today in History

Mobile TV Market (1) Cell Phone plus TV, the Dream of Everybody - 2007/11/18

Great Future of Wireless Broadband (2) Public WiFi is Not Enough - 2006/11/19

Great Future of Wireless Broadband (1) Living in the WiFi City - 2006/11/12

Google's Choice (1) Lessons for Portals - 2005/11/13

A Word of Advice for Small Online Stores - 2004/11/14

Web 2.0 is not the end of the revolution; it is but an evolution.

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[+] Web 2.0 is a confusing term

 

On the topic of Web 2.0, I have written 10 series articles, spanning the areas of Internet media, search engine, online communities and electronic commerce. I elaborate my thoughts on Web 2.0 thoroughly with the axis on the idea that the declining cost of storage of bandwidth will trigger changes when it continues to drop to a critical level.

 

In this last article I would like to point out a simple fact that, for me, there is no such a thing as Web 2.0 in the world. The source of the confusion, which has become even more ambiguous when there are so many people in the world so eager to give it an explanation, lies in its version number.

 

The appearance of 2.0 easily leads people to mistake that it is a completely different thing from Web 1.0, and to ignore that there may also be versions like Web 1.7354 or Web 1.212 in between these two. It misleads people to think that web 2.0 is a Revolution but not Evolution.

 

This is why Web 2.0 is but a transition but not an end of some kind of revolution. As nobody can clarify the causes and effects and even the direction of future developments, it does not bring too many benefits to us by using this term.

 

[+] The survival condition for Internet services: Cost

 

Along the course of Internet development, many new things have appeared, and managed to survive, with the decline of Internet bandwidth and computer storage cost. Many innovations may have been brought up long before the year of 2000, but they didn't make it to survive or succeed because of the lack of a favorable cost condition.

 

Now the operators have found that they can buy bandwidth and storage several times as much as what they used to get with the same money, and now they can supply services, in great quantities, which they may not be able to provide even with huge investment. An example is the 1GB email service by Google. This is the first type of typical responses.

 

For free personal homepage and photo album service appearing in the early time, once abandoned by portals because of the unbearable burden of high bandwidth cost after the year of 2000, they are now in mass supply in the form of Blog similar to the old personal homepage service. There is now a favorable cost condition for the emergence and popularity of Blog.

 

Broadband access is getting more popular among Internet users, and users can get several times the bandwidth they used to get with the same amount of money. As such, users are become more willing to use more sophisticated services that demands higher bandwidth and involve more interaction. There are still cost conditions for users to accept certain types of services.

 

[+] Cost shifted back to Internet users

 

It is not smart for website operators to only thinking about providing services that consume a lot of bandwidth. The real smart operators will think about how to shift the cost of high-bandwidth services back to users. As such, we've seen some B2C services turning to the C2C model.

 

One most striking example is the Internet phone service provided by Skype, which shifts the part of the service that consumes the most bandwidth back to users by enabling them to connect to each other directly. The operational cost has thus been greatly reduced, which has drastically changed the cost structure of and the dynamics in the telecom industry.

 

The reason why Wikipedia can challenge the traditional Encyclopedia Britannica is that it has shifted the huge burden, the compilation of the encyclopedia, back to Internet users themselves. This is the typical challenge posed to B2C by C2C in the so-called Web 2.0 way.

 

Even software developers are taking this trend seriously and are starting to take advantage of it. Microsoft, Google and Yahoo! rush to open their website API, hoping to attract programmers in the world to develop applications in accordance with their standards. It is exactly to throw back the software development cost back to the Internet.

 

[+] Cost conditions for web-based software to prevail

 

Speaking of software, there are more and more software companies putting efforts in developing web-based software. In the past, consumers used to buy packaged software to install on their home PCs, now they only need to connect to vendors' websites to proceed with similar functionalities via their browsers without buying packaged software or any installation.

 

Among various web-based tools, those which provide functionalities similar to Microsoft Office receive most attention. Many websites provide registered users with functionalities similar to Word or Excel that can be operated via browsers; the most striking example is Google's Google Docs & Spreadsheets.

 

At the moment, these web-based browser-interfaced software tools are given for free, but there will certainly be for-pay services. For example, versions with less, simpler functions may be given to users free of charge and subsidized by advertising revenue, but premium versions are to be provided on a monthly subscription basis. For developers, it means that they can sell software online now.

 

AJAX technology provides better interactivity and similar experience on a browser as that with conventional software. It also allows multiple users to edit the same document at the same time, enabling efficient communication. It was but it didn't hit the market many years ago when Microsoft put it at the core of its browser system. Why?

 

The answer is still the cost! For many years, software companies sell packaged software through distributors. Now because of "the declining cost of computer storage and network bandwidth", web-based versions will be cheaper than packaged ones in terms of selling costs. There are cost conditions for a product to become a market success.

 

[+] Take the advantage of low interpersonal communication cost

 

When the bandwidth becomes cheaper for users, the cost of interpersonal communication, whether between acquaintances or strangers, will consequently fall. This paves the way for social network websites to take off. We finally come to realize that "the cost to find a certain type of people gets a lot lower than before", which is sure to arouse dramatic industrial changes.

 

When the cost of interpersonal communication keeps dropping, the transaction cost would be falling down too. By this it means that the intermediaries who had played a role in facilitating the meeting and transactions between two parties are no longer able to charge high fees for the matching service.

 

This is why eBay has posed a threat to traditional B2C business, and classified websites like Craigslist are to encroach on the market of auction websites like eBay. As the direction of the Internet development is clearly towards lower transaction cost, there will be little room for intermediaries to monopolize and charge for transaction information.

 

As for e-commerce companies, there is no need to fear or doubt, because the key underneath the transformational force has remained the same thing: cost. The only thing they need to think through is how to take the advantage of the growing user base to drive the cost down and to create more value.

 

[+] What does Web 3.0 look like? When will it arrive here?

 

For those who are not familiar with the Internet industry, they may base their understanding on media reports and associate Web 2.0 with gossips and online dating, online diaries and photo sharing, getting to know more people through social network websites, or hearsays about big buyout bids for some Web 2.0 website.

 

I am always in the belief that terms like RSS, Blog, SNS, and Wiki describe only the appearances; they are the effects, not the causes, of the changes. Allow me to reiterate that "the key is always the cost," and the true spirit of the so-called Web 2.0 is:

 

The root of the Internet revolution is but one thing - the ever declining cost of digital storage and transmission bandwidth. Socially, it is reflected on "the continuously falling cost of interpersonal communication; on the business side", it is "the gradual disintegration of enterprises which used to thrive on their monopoly of capital and information".

 

I have been asked by some reporters to predict the possible scenario of Web 3.0. All I can say is that, just imagine what will happen to the world when the above mentioned cost is approaching zero, and you may get to see some look of Web 3.0.

 

As to when Web 3.0 will arrive, I can give you a sure answer. It is when the fiber reaches each household or 4G wireless broadband network prevails everywhere, when you can get bandwidth several times as much as that offered by ADSL or 3G services now. It will surely arrive in five to ten years time. ( 2006/11/05 - By Digitalwall.com - Way to China Internet/Telecom )

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- Today in History

The Web 2.0 Revolution (10) the Big Future of Web 3.0 - 2006/11/05

The P2P technology enables Skype to provide service without making huge investment, since the bandwidth cost has been handed down to users.

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[+] The operational cost of email service

 

The lowering of communication cost is the best gift brought by the commercialization of the Internet. Most people can't even remember when is the last time they wrote a letter with a pen on paper to friends afar, but they write emails to colleagues next desk in the office everyday.

 

Emails are sent through a central mail server from a sender's PC and forwarded through another mail server that link to the receiver's PC. This method has completely replaced paper letters that are more costly and slowly.

 

Emails may have eliminated traditional paper letters, but it is also facing the challenge from yet another communication tool. In fact, since there must be a mail server in between to deliver emails, an email service provider has to afford a significant amount of storage and bandwidth cost.

 

If the delivery of electronic messages can be completed by connecting two PCs directly without servers involved in between, and thus shifting the storage and bandwidth cost to the sender and receiver, then the financial burden of communication service providers may become lower.

 

Instant messaging (IM) software like QQ, MSN Messenger is such kind of service, the provider of which is only responsible for connecting the communicating parties. After the connection is established, all messages are transmitted from one individual user to another, with no server involved.

 

[+] The low operational cost of P2P model

 

In fact, IM software has partly replaced email tools. As those we contact frequently are mostly acquaintances or partners at work, IM is more convenient and responsive. Many times we choose IM, instead of emails, to communicate with others.

 

Users of these communication tools users may not be aware of the technology involved, but for communication service providers, P2P is more cost efficient than Client-Server architecture.

 

Though the use of these tools has nothing to do with Web, but the emphasis on peer-to-peer (C2C) rather than client-server (B2C) communication is in accord with Web 2.0. In fact, let's keep in mind the true meaning of Web 2.0:

 

The root of the Internet revolution is but one thing - the ever declining cost of digital storage and transmission bandwidth. Socially, it is reflected on "the continuously falling cost of interpersonal communication; on the business side", it is "the gradual disintegration of enterprises which used to thrive on their monopoly of capital and information".

 

Finally, the new generation IM service provider has brought a radical and unprecedented change to the application of P2P technology: the arrival of Skype is the consequence of P2P architecture introduced to the Internet telephony service which used to be dominated by client-server technology.

 

[+] Revolution can not succeed by mimicking your competitor

 

In the case of traditional telephone service, a call is initiated by a caller, who dials a number, and switched by a telecom operator, which sets up the connection with the receiver; the switch continues to take care of the transmission of the conversation that follows. Every word you say will first enter the telecom operator's switch then be forwarded to the receiver - what we see here is a client-server relationship.

 

Telecom operator thus needs to invest in costly equipment to provide such service. As the subscriber base continues to swell, the investment will grow in a relatively linear manner. Operators are constantly driven and by the demand for bandwidth by new subscribers - this difficulty is intrinsic to the client-server technology.

 

Internet phone emerged ten years ago when the operators were thinking about lowering their cost by providing voice communication service via the IP technology. Yet their thinking was still centered on a client-server approach: users purchased an Internet phone set and had it installed at home; users' conversation was still transmitted through operators' switch.

 

Such way of thinking is no different than that of the traditional operators and has kept the cost of bandwidth and equipment high for Internet phone service providers. To compete with operators they have to set their rates lower in order to attract subscribers, which has capped the growth in their revenue. That is why the Internet phone business remains lukewarm for these years.

 

Obviously, it is a naive idea to try to compete with traditional telecom operators by mimicking their business model. The telecom market is characterized by severe barriers to new entrants because of the huge investment needed in building up the client-server type telecom infrastructure. To challenge telecom giants, the only way is to come up with a new business model.

 

[+] The achievement of Skype: challenging the cost structure

 

Skype, as an IM tool, didn't bring too much surprise to the world at its debut, but it did leave good impression to users by its good sound quality. Its focus on providing Internet phone service was a refreshing approach.

 

When users using Skype, all communication data is transmitted directly to and from the both parties without any Skype server in between. This P2P model enables Skype to provide service without making huge investment, since the bandwidth cost has been handed down to users.。

 

This is what really upsets the telecom operators. Telecom operators are not particularly concerned about of potential competitors with deeper pockets as long as the market barrier remains high. Now even small companies can join the business, which has shaken the fundamentals of the industry.

 

Why Skype's Internet phone model didn't show up ten years ago? As a matter of fact, the broadband service was costly and not very popular then. But now people can enjoy the benefits of high-speed access with relatively less money, so that it is possible now for Skype to shift the bandwidth cost to users themselves with the help of P2P technology.

 

When the Internet phone service will succeed in revolutionizing the telecom industry? It is when users are able to benefit from higher bandwidth with even less money. At the initial stage, the high perpetration of ADSL and Cable broadband service has paved the way for the scene, now we are expecting FTTB (Fiber to the Building) with stronger broadband capabilities to drive the progress.

 

In terms of wireless communication, we've already seen 3G on the stage, and we have high hopes for WiMax which promises even high bandwidth. It may take five to ten years to see the results of these developments. Yet we should always keep in mind the big question: what would happen to the world when people can get ten times the bandwidth at the same price they are paying now? ( 2006/10/22 - By Digitalwall.com - Way to China Internet/Telecom )

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- Today in History

The Web 2.0 Revolution (9) New ECommerce - 2006/10/29

The Web 2.0 Revolution (8) Transformation of the Telecom Industry - 2006/10/22